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A milk transport company that is now in business rescue failed to pay dairy farmers millions for milk that it took from them earlier this year.
Desmanda Milk, which has been one of the biggest milk transport companies in the country, missed payments to over 20 dairy farmers in KwaZulu-Natal, the Eastern Cape and the North West, to an estimated value of between R80 and R90 million.
This is according to Fanie Ferreira, CEO of the Milk Producers Organisation (MPO) industry association, who estimates that 10 million litres of milk was taken, but not paid for.
Milk transport companies – such as Desmanda – are middlemen that buy milk from producers and sell it to processors.
Ferreira said the MPO was likely not aware of all the affected producers, but said the effect of the non-payment on farmers could be significant.
“In all cases, the impact is going to be severe,” he said, adding:
“It’s a cashflow business, and if you take one month of cashflow out of the business, it’s going to be severe.” But Ferreira said the MPO was not aware of any milk that had been wasted as a result of the pay dispute. He said many farmers had contracted another milk transport company or had entered into agreements with producers like Clover directly.
Smooth until 2024
One affected farm owner, who owns two dairy farms, said they first contracted Desmanda milk for transportation services in 2021, and hadn’t had any problems until earlier this year.
The farm owner, who asked to remain anonymous, said Desmanda – which is based in Heidelberg, Gauteng – would collect milk from the farms daily and make a single monthly payment.
The first missed payment was towards the start of March, concerning milk collected from one of the farms in February. The farmer continued to supply Desmanda until the middle of March and has received no payment for this either. Overall, it is still owed about R13.5 million for this milk.
The farmer said the cash flow crunch meant he had to make hard decisions to ensure operations were not affected:
“I had to pull a rabbit out of a hat. Those are some personal decisions that I had to make, but it wasn’t easy.”
The farmer said the company was now dealing directly with Clover. It remains focused on farming while the debt is outstanding.
“We are going to try our best to get our money back. Obviously, we can’t walk away from it, but what are our options? We are just doing our best.
“We have just got to focus on the farming now to make sure we can carry on and leave the fighting for the lawyers and the business rescue guys to try and come up with a solution and the best way forward,” said the farmer.
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Mitigation efforts
Gideon Slabbert, one of the business rescue practitioners (BRPs) at Desmanda Milk, confirmed that Desmanda entered business rescue on 16 April.
Slabbert and Thomas George Nell, from Corporate Business Rescue advisory, were appointed as the BRPs. Christoff Viljoen from CVRA Auditors is assisting the team from an auditing and forensic point of view.
“Desmanda Milk remains committed to ensure that the effect of the disruption is limited and mitigated,” Slabbert told News24. He said the BRPs met with representatives of the MPO last week to find a solution.
“The meeting was constructive, and various solutions or potential outcomes were discussed in an attempt to find an amicable solution. As for the outcome, we are working on a restructuring plan. The success of such a plan depends on the participation and engagement of all stakeholders.”
He said the BRPs were working tirelessly to investigate the financial affairs of the company in an attempt to identify the source of the financial distress. The findings will be incorporated into the proposed business rescue plan.
Slabbert said he could not comment on the accuracy of the nonpayment figure of R80 million to R90 million put forward by Ferreira at this stage, as all affected farmers are yet to submit a claim. These will then be reconciled with the company’s financial records and the outcome will be communicated.
